39. In this section we concentrate on the impact
of HIV/AIDS on social and economic development. We put this before
our consideration of prevention and care not because we think
it is intrinsically more important but because we believe it is
that aspect of the epidemic which remains seriously overlooked.
In examining the various impacts of HIV/AIDS one runs the risk
of ignoring the fundamental impoverishment of the epidemic 
the loss of life. It is this devastation of human potential, and
the grief and trauma inflicted on the bereaved, which remain our
prime motive for action. But the fact is that the epidemic is
having an effect far beyond the lives of those infected and their
families. Health and education systems, the economy, agriculture,
security are all threatened. It is now fashionable to insist that
HIV/AIDS is not just a medical problem but also a developmental
one. As we go on to demonstrate, this is absolutely true. However,
the response of donors to this insight is to give greater weight
to their prevention work and add to it a new emphasis on care.
This is essential but not enough. All development must be done
differently. For money to be well spent, projects and programmes
must be robust against the depredations of HIV/AIDS. And they
must be designed so as to counter its effects.

40. The following section looks at the impact of
HIV/AIDS on different sectors and offers some suggestions as to
what an HIV/AIDS-sensitive approach would look like. Consideration
of these matters appears to be at an early stage, with limited
research into impact and even less into how development should
respond. Thus analysis of impact will on occasion be tentative
and recommendations as to the response of DFID and other donors
may be in the form of a 'menu' of options for further work.

44. DFID told us that "there has been little
work so far to link [the epidemic's effects] directly to impact
on the international development targets. But even without explicit
data, it is generally accepted that in countries with the highest
infection rates, it is unlikely that the international development
targets will be met".[27]
Countries they expected not to reach the targets as a result of
HIV/AIDS included Botswana, Ethiopia, Kenya, Mozambique, Namibia,
South Africa, Tanzania, Zambia and Zimbabwe. The infant mortality
target is particularly affected by HIV/AIDS. By 2005-2010 infant
mortality in South Africa will be 60 per cent higher than it would
have been without HIV/AIDS. In Zambia and Zimbabwe 25 per cent
more infants are already dying than would be the case without
HIV/AIDS. By 2010 infant and child mortality rates in these two
countries will have doubled.[28]

45. DFID's memorandum also points to the impact of
HIV/AIDS on girls' enrolment in school, on the economy of a country
(and thus on poverty rates) and on the health service, so overstretched
as to be even less able to deliver universal access to sexual
and reproductive health services.[29]

46. It is important to bear in mind that a large
proportion of the world's poor live in two countries, India and
China. Neither is as yet as severely affected by the HIV/AIDS
epidemic as sub-Saharan Africa. Thus there is greater room for
progress against the IDTs. If these two countries succeed in making
significant inroads into poverty the global figures for the IDTs
will look healthy, obscuring the fact that at a regional and country
level the epidemic is condemning a continent to remain in extreme
poverty, if not decline even further.

47. Other indicators of poverty should also be used
in assessing the impact of HIV/AIDS. The most important indicator
is life expectancy, not explicitly taken into account in the international
development targets (though the maternal, infant and child mortality
targets are obviously relevant). DFID state that "In the
13 or so African countries with adult prevalence of 10 per cent
or more, HIV/AIDS will erase 17 years of potential gains in life
expectancy, meaning that instead of reaching 64 years, by 2010-2015
life expectancy will regress to an average of just 47 years; this
represents a reversal of most development gains of the past thirty
years".[30]
The Human Development Index (HDI) published by the United Nations
Development Programme (UNDP) has since 1998 taken account of the
demographic effects of HIV/AIDS. The calculation of a country's
position on the Index includes life expectancy at birth as an
indicator. The Human Development Index for 2000 makes grim reading.
It states that "Twenty counties have experienced reversals
in human development since 1990 as a result of HIV/AIDS, particularly
in sub-Saharan Africa". Over a longer timescale "Seven
countries in sub-Saharan Africa  Botswana, Burundi, Congo,
the Democratic Republic of Congo, Kenya, Zambia and Zimbabwe 
saw a reversal in 1985-98 in the progress they had made in building
basic human capabilities in the previous decade (1975-85). The
reversal is explained largely by the drop in life expectancy due
to HIV/AIDS. Similar effects can be seen in Central African Republic,
Namibia and South Africa in 1990-98.[31]
Uganda is the only country which has managed to turn around such
a reversal.

48. The impact of HIV/AIDS on life expectancy must
be added to the other poverty indicators in an assessment of how
HIV/AIDS affects development. Life expectancy is perhaps the most
important of all criteria and there can thus be no greater developmental
crisis than an epidemic that is actually reversing past developmental
gains in life expectancy. It is clear that the HIV/AIDS epidemic
has made the international development targets impossible to achieve
in those countries where it has taken hold, and that past developmental
achievements have been reversed. Any responsible development policy
must take account of HIV/AIDS in every aspect of its approach.

49. Professor Alan Whiteside said, "One of the
most striking features of most of the development goals 
what they are, how they should be achieved, and what indicators
should be used  is the degree to which the HIV epidemic
appears to be ignored. There is little grasp of what AIDS means
beyond the health sector. It is the contention of the author that
it has the potential to undermine development in every sense of
the word and undercut development goals".[32]
UNAIDS state that "Estimates in 1991 predicted that in sub-Saharan
Africa, by the end of the decade, 9 million people would be infected
and 5 million would die  a threefold underestimation".[33]
The IDTs were formulated in the early 1990s when there was a serious
underestimation of the progress of HIV/AIDS and ignorance as to
its developmental impact.

50. Targets are of course meant to be challenging
and there is clearly no point in discarding targets when they
appear too difficult to achieve. The fact that a target is not
going to be met can itself be a spur to political action. HIV/AIDS
has made many of the international development targets irrelevant
to sub-Saharan Africa. The targets were agreed before the full
extent of the epidemic was known. This fact needs to be acknowledged
by the international community and seriously addressed. We recommend
that the Special Session of the UN General Assembly on HIV/AIDS,
to take place in June this year, consider how to reinvigorate
efforts in sub-Saharan Africa to meet the international development
targets, assessing current prospects in the region and what progress
can be made, perhaps setting additional regional targets.

52. Before considering the macroeconomic impact of
HIV/AIDS, we must examine effects at the level of business and
private sector operations. One obvious way in which HIV/AIDS has
an impact on business is through the loss of workers. The ILO
in its Report 'HIV/AIDS: A threat to decent work, productivity
and development' states, "AIDS deaths lead directly to a
reduction in the number of workers available, and particularly
workers in their most productive years".[35]
The Report goes on to estimate the effect of HIV/AIDS on the workforce.
We have discussed above the impact of HIV/AIDS on population growth.
The ILO's conclusion is that "the labour force in high prevalence
countries in the year 2020 is estimated to be about 10 to 22 per
cent smaller than it would have been if there had been no HIV/AIDS.
The labour force is still expected to keep growing. But because
of the increased mortality, there will be about 11.5 million fewer
persons in the labour force".[36]
Anglo American stated, "In South Africa some companies are
losing around 3 per cent of their workers each year to AIDS".[37]

53. Lower life expectancy will thus constrain developing
economies in that there are fewer workers available. It has been
repeatedly emphasised that HIV/AIDS affects disproportionately
the adult working population, producing a "loss of people
in their 30s and 40s: people who keep the wheels of commerce and
the state turning, and provide the next generation of leaders"[38].
Christopher Wheeler from Standard Chartered Bank said, "Approximately
three years ago we started to notice a higher incidence of sickness,
of death in service, and so forth"[39].
He estimated that up to 30 per cent of their workforce in Zambia
could be infected [40].
Clearly such high incidence of HIV in a workforce will have serious
implications for staffing, not simply in terms of increased mortality
but also much higher incidence of sickness and a decline in morale
amongst the workforce.

54. The TUC said, "There is some evidence to
suggest that with high unemployment and underemployment in many
countries, the shortfall in the labour supply has been met by
people seeking employment".[41]
There will be presumably be a corresponding effect on labour costs.
But workers are not always so readily replaceable. Most workers
receive some training from their employers, an investment unrealised
when the worker is lost through premature death. This effect is
greater, the greater the skill of the worker lost. As the TUC
put it, "Replacing such skilled workers is difficult and
while it might be possible in some cases to substitute capital
or technology for a dwindling workforce, this is not always an
option. The situation is exacerbated by the toll that HIV/AIDS
is taking on the education sector".[42]

55. The dangers of the loss of skilled staff were
acknowledged by Standard Chartered Bank, "our staff are highly
trained in the use of technology but, with there already being
a shortage of skilled manpower, an organisation such as ours needs
to minimise the risk of losing such staff and look after those
that become unwell".[43]
Given such dependency on skilled labour, the Bank is monitoring
closely the impact of HIV/AIDS on numbers of staff, "In addition,
vigorous recruitment and retraining drives are underway particularly
in the businesses in some of the countries where infection rates
are estimated to be between 25 per cent and 40 per cent 
including Zambia, Zimbabwe and Botswana. This is in order to ensure
we are able to maintain the level of service and staffing levels
required by the business/customers".[44]
Anglo American also make the point that even before the HIV/AIDS
epidemic "Sub-Saharan Africa starts with the lowest proportion
of skilled workers of any geographical region and with a disproportionate
share of the world's poorest countries"  it is thus
least able to support the loss of skilled workers to the disease.[45]
ING Barings estimate that by 2015 19 per cent of skilled workers
in South Africa will be HIV-positive.[46]
They also warn of cost pressures arising from increased training,
staff replacement costs, skill shortages and higher benefit payments.[47]
Anglo American have introduced "the concepts of multi-skilling
and self directed work teams have been implemented at many of
the operations".[48]

56. Many of the effects of HIV/AIDS are quantifiable.
Many others are not  they concern morale, confidence, a
sense of security and purpose  and yet these are as fundamental
to personal happiness and to social life. Standard Chartered Bank
spoke in their memorandum of the impact on staff morale as workers
lose loved ones and breadwinners, "One of our senior staff
lost her husband, all her brothers, and two sisters to AIDS. She
later died of AIDS. Her story is not rare".[49]
They estimate that 70 per cent of staff in Africa "have close
relatives and/or friends, who are infected with the HIV virus,
have died or are dying".[50]

57. Dr Brian Brink warned against too alarmist a
view of the impact of HIV/AIDS on companies, "When one first
hears prevalence figures the reaction often is one of alarm but,
in fact, the situation despite what might appear to be large numbers
can still be very manageable".[51]
Jenny Crisp from Anglo American referred to the company's operations
in Zimbabwe, where the epidemic was quite advanced. She agreed
that HIV/AIDS was having an impact but added, "it is not
putting any of our companies out of business ... you might have
a situation where you have a pool of employees and the infection
level might be as high as 25 per cent but most of that 25 per
cent at any one time in fact are well and fit, they are not getting
sick. If you think that the average time from infection to becoming
ill is eight years, then the 25 per cent will get sick over a
six-year period. So the numbers who are getting sick each year,
and our figures in Zimbabwe show this, is about two and a half.
That is actually manageable".[52]

58. It must be remembered that those who came to
give evidence are precisely those companies which are attempting
to reduce infection rates in their workforces and mitigate the
impact of the epidemic. Moreover, they are multinational companies
with considerable resources at their disposal and better placed
than most to accommodate extra costs. We should not make the mistake
of assuming that all businesses are in the same position. Jenny
Crisp agreed that there were many companies which were not facing
up to the epidemic, "that is part and parcel of this whole
denial. The denial does not necessarily apply to the individual,
it applies to the organisation as well. I think it is something
that is not peculiar to the AIDS problem. I think a lot of companies
tend to be reactive rather than proactive".[53]
Those doing something were "a small minority".[54]
We are sure that many large, multinational companies have yet
to assess the likely impact of HIV/AIDS on their activities, are
missing vital opportunities to reduce HIV/AIDS incidence, and
are thus going to see their productivity and profitability seriously
impaired.

59. When pressed on whether the companies giving
oral evidence to us would remain profitable in these countries
Christopher Wheeler said, "I would suggest that for relatively
sophisticated organisations who are able to provide the level
of education and understanding of the issues, that is possible.
I would suggest that there are many local companies who would
find that difficult to achieve".[55]
Clearly small and medium-sized businesses in sub-Saharan Africa
will be severely affected as an increasing number of HIV-positive
people succumb to AIDS. Christopher Wheeler told the Committee
of work done by Standard Chartered Bank with local business and
customer groups to spread prevention messages.[56]
Jenny Crisp was less clear as to the opportunities for Anglo American
to pass on HIV/AIDS good practice directly to local businesses,
"We do not have a programme to address HIV and AIDS with
our suppliers simply because they are so numerous and generally
we do not have contact with them".[57]
Dr Brink mentioned the Business Council on AIDS in South Africa
as an important forum to assist SMEs in considering HIV/AIDS matters.[58]
He stressed that "certainly for South Africa and probably
southern Africa, the growth of small and medium enterprises is
critical to the development of the economy, so we have to find
a way that those small businesses also take their part in dealing
with this".[59]
DFID in its booklet Enterprise and Development states of SMEs
that "Their often labour intensive nature means they are
a leading source of job creation in developing countries. Their
ability to respond flexibly to dynamic markets is imperative for
sustainable economic growth in today's globalised economy".[60]
DFID employs some 25 Enterprise Development Advisers and Field
Managers in London and overseas who supervise a current portfolio
of project commitments totalling over £200 million. We note
that in the booklet 'Enterprise and Development' there is no mention
of challenge posed by HIV/AIDS, never mind of how to face it.
No doubt the document is not intended to be exhaustive. Nevertheless,
the impact of HIV/AIDS on small and medium-sized enterprises,
particularly in sub-Saharan Africa, must be addressed as a priority.
We expect development programmes to be reconsidering such issues
as the provision of credit and management of debt, linkages with
larger businesses, and employment and training practices, in the
light of the illness, and the absences which HIV/AIDS produces
at work.

60. We consider that multinational companies have
an obligation to assist, both directly and through Business Councils,
small and medium-sized enterprises in countries affected by HIV/AIDS.
This should include the sharing of best practice and perhaps of
certain courses and facilities. It is also necessary for national
governments and donors to have a strategy as to how to support
the informal sector and SMEs through the HIV/AIDS epidemic.

61. We also heard evidence of the likely impact of
HIV/AIDS on investment. Anglo American thought that there would
be "reduced attraction for international investment due to
increased country risk".[61]
Furthermore, "the high incidence of HIV/AIDS in Africa reinforces
the negative perceptions which some international investors have
of the Continent, risking discouraging the private capital investment
which Africa so badly needs".[62]
In oral evidence, Dr Brian Brink, Anglo American, identified such
a perception as "part of the education challenge. As a company
we have to demonstrate very clearly that despite the fact that
the epidemic is there ... it is still possible to run successful
businesses and it is still an attractive investment opportunity".[63]
James Cochrane from Glaxo Wellcome had not noticed any impact
of HIV/AIDS on foreign direct investment.[64]
Christopher Wheeler from Standard Chartered bank believed that
the businesses operating in Africa suggested "that there
are many opportunities within those countries for successful businesses
at very good margins".[65]

62. Alan Whiteside provided two interesting case
studies of the impact of HIV/AIDS on investment. The Joshua Doore
Group, a South African based retail company, carried out a survey
of the impact of HIV/AIDS on its businesses in 1998. Their conclusions
were that the epidemic would have a significant impact on numbers
of customers as well as an effect on spending as disposable income
is reallocated. One decision they took as a result of this study
was to diversify "geographically away from the HIV/AIDS epidemic.
As a result, it has expanded into Eastern Europe and is opening
shops in Czechoslovakia [sic] and Poland".[66]
As a second example, he pointed to Botswana where in response
to the impact of the epidemic on its workforce the country is
buying in skills, "It buys in Sri Lankans and Bangladeshis
and people from the Far East who are cheaper than people from
Europe and Asia, and it will test them before they come".[67]

63. We suspect that few companies have as yet done
the sort of forward-thinking study conducted by Joshua Doore Group
into the impact of HIV/AIDS on their operations. It is certainly
not apparent that consideration of the consequences of HIV/AIDS
has as yet had a significant effect on investment (already pitifully
low) into sub-Saharan Africa. As the epidemic progresses and AIDS-related
mortality increases we suspect this will change, particularly
as a result of a decline in the availability of professional expertise
and shrinking of markets. The nature of the response will depend
on the nature of the business. We have seen an example of how
a retail business can diversify its activity out of high prevalence
areas. For extractive industries, on the other hand, a way round
the skilled labour shortage must be found. The bringing in of
skills from outside the country is certainly not ideal and is
not without its own danger of spreading the epidemic. It is important
to develop the skills base of developing countries. Nevertheless,
the crisis is such that less than perfect solutions are becoming
the only solution. The importing of professional expertise as
an emergency response is better than the collapse of an industry
or public service. We believe that serious international consideration
must be given to how to respond to the growing skills shortage
in countries with high HIV/AIDS prevalence. We believe systems
need to be put in place both to ensure that such skills can be
brought in readily but also that such interventions are considered
temporary and accompanied by greater investment in the education
and training of local people.

64. We do not as yet see much evidence of a diversion
or reduction of investment flows as a result of HIV/AIDS. We fear,
however, this is not a product of reflection by the financial
and business community, but rather a failure to reflect. Impacts
will of course vary according to the nature of the industry. Those
highly dependent on local raw materials will no doubt continue
where they are and cope in other ways. The concern is over the
impact of a shortage of skilled labour on any attempt by countries
in sub-Saharan Africa to enhance their productive capacity and
develop their industrial base.

65. More investment in sub-Saharan Africa is desperately
needed. We must emphasise that such investment can take place
successfully and profitably, even with an HIV/AIDS epidemic. What
is needed is an intelligent assessment by business of the environment,
and investment to be accompanied by effective prevention and care
programmes in the workplace.